The UK Supreme Court has made a landmark ruling on equal pay which should make all councils sit up and pay attention. The ruling was granted after a group of 174 women brought a case against Birmingham city council for paying them less than their male counterparts. A decision in their favour set a precedent and has extended the time period that an employee can bring a claim for equal-pay compensation from six months to six years.

This ruling marks the biggest change in equal-pay law since it was introduced in 1970, and is likely to affect many more local authorities across the country. The potential liability for councils could be significant: it is estimated that the 174 claimants in this case are together entitled to £2m in compensation.

Faced with a potential payout, it would be prudent for other authorities to consider whether they too are vulnerable to further equal-pay claims in light of this decision. If so, they must budget accordingly.

With the extension of the time limit on claims now extended to six years, employees who left a local authority some time ago could bring an action against it. Unions that have previously advised members not to bring claims against ex-employers may now advise to the contrary – if they do not, they place themselves at a risk of a negligence claim.

It is, of course, essential that local authorities have a robust job-evaluation process in place for all posts. However, the extension of the time limit for claims may mean that authorities who have made every effort to improve their pay processes in the past few years may still now be held accountable for past inequalities already struck off the risk register.

The fear of being forced to enter into costly court proceedings couldn't come at a worse time, given the considerable financial pressure that local authorities face. An unsuccessful party in the civil courts is likely to be liable for the opponent's legal costs as well as their own.

The risk for local authorities in defending claims increases where there is a chance that they may lose. To avoid additional costs, it may be wise to try to agree early out-of-court settlements with claimants.

This situation is not ideal for local authorities, but what is most important is that councils use this ruling as an incentive to review their equal-pay risks and prepare to respond appropriately if claims against them arise.